Microsoft, Amazon play nice with patent-licensing agreement

Amazon will pay its cross-town tech buddy Microsoft an undisclosed amount of money for a patent-licensing agreement that opens up each company’s intellectual property portfolio to the other.

UPDATE5:37 p.m. – Spoke with an industry analyst.

Specific terms of the deal were confidential, but Amazon ostensibly is after legal use of some specific Microsoft technologies. Microsoft said the agreement covers the Amazon Kindle, which runs both open-source and proprietary software, and Amazon’s use of Linux-based servers.

Seattle-based Amazon and Redmond-based Microsoft aren’t often seen working together, though Microsoft CEO Steve Ballmer did mention Amazon’s “Kindle for the PC” software when he was launching Windows 7 in October. The companies’ corporate cultures don’t necessarily mesh, and competition between them has heated up since Microsoft’s announcement of Windows Azure, the cloud-computing platform that competes with Amazon EC2.

“If you think about it, it just seems to make sense,” said Michael Cherry, an analyst with the Kirkland-based firm Directions on Microsoft. “You’ve got two tech companies with intellectual property, and they will overlap. In some places they’ll compete and in some places they’ll partner.”

Cherry said tech companies often strike these agreements to avoid patent-infringement lawsuits. In this case, it seems that Microsoft could have been claiming Amazon infringed some of its patents.

Microsoft might have claimed that the Kindle, for instance, treads on its many patents which came out of Redmond’s work on tablet PCs and e-readers. Microsoft has also previously claimed that Linux, which the company said Amazon uses as a server operating system, incorporates technology patented by Microsoft.

Patent-licensing agreements could become more commonplace as companies tire of filing infringement lawsuits and the expenses that go with them, Cherry said.

“I think both companies are practical,” he said of Microsoft and Amazon. “Amazon and their cloud offers some Windows technologies as well as some other technologies. They’re very platform-agnostic.”

“In general,” Cherry added, “it doesn’t surprise me that the Kindle would have a variety of technologies that many people could have (claimed).”

There is next to no chance that either Microsoft or Amazon will officially disclose what sparked Monday’s agreement.

“We are pleased to have entered into this patent license agreement with Amazon.com,” Horacio Gutierrez, Microsoft’s corporate vice president and deputy general counsel for Intellectual Property and Licensing, said in a news release Monday evening. “Microsoft’s patent portfolio is the largest and strongest in the software industry, and this agreement demonstrates our mutual respect for intellectual property as well as our ability to reach pragmatic solutions to IP issues regardless of whether proprietary or open source software is involved.”